Stocks and Shares

Stocks and Shares

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1. Key Terminology

TermDefinition
Stock CapitalThe total amount of money needed to run a company.
Shares / StockSmall units of the total capital.
DividendThe annual profit distributed to shareholders (paid on Face Value).
Face ValueThe value printed on the share certificate (also called Nominal or Par Value).
Market ValueThe price at which a stock is currently bought or sold in the market.
BrokerageThe fee charged by a broker (Added to Cost Price when buying; Subtracted from Selling Price when selling).

2. Market Value Conditions

ConditionMeaning
At Premium (Above Par)Market Value $>$ Face Value
At ParMarket Value $=$ Face Value
At Discount (Below Par)Market Value $<$ Face Value

3. Core Calculation Formulas

MetricFormula
Number of Shares$\frac{\text{Total Investment}}{\text{Investment in 1 Share}} = \frac{\text{Total Income}}{\text{Income from 1 Share}} = \frac{\text{Total Face Value}}{\text{Face Value of 1 Share}}$
Annual Dividend$(\text{Dividend \%}) \times (\text{Face Value})$
Rate of Interest (Yield)$\frac{\text{Annual Income}}{\text{Investment}} \times 100$

4. Practical Example Summary

Example: A $100$, $9\%$ stock at $120$ means:

Contents
1. Key Terminology2. Market Value Conditions3. Core Calculation Formulas4. Practical Example SummaryImportant “Remember” Rules:
ComponentValue
Face Value$100$
Market Value$120$
Annual Dividend$9$
Return on Investment$\frac{9}{120} \times 100 = 7.5\%$

Important “Remember” Rules:

  • The Face Value of a share always remains constant.
  • The Market Value changes based on market conditions.
  • Dividend is always calculated and paid on the Face Value, regardless of the Market Value.
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